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JSC VTB Bank -v- Alexander Katunin -v- Sergey Taruta

April 2018 AppealFreezing Orders

BRITISH VIRGIN ISLANDS

COURT OF APPEAL

BVI LITIGATION AND RESTRUCTURING – COMMERCIAL LAW – CASE MANAGEMENT POWERS – APPLICATION TO EXTEND PERIOD FOR SERVICE OF CLAIM FORM OUT OF JURISDICTION

These proceedings concern an appeal by the claimant JSC VTB Bank (“VTB”) against the decision of Wallbank J [Ag.] to discharge a Worldwide Freezing Order (WFO) granted in favour of VTB and refusing an extension of time for service of a claim form out of the jurisdiction.

On 23 May 2014 in the Court of first instance, VTB obtained a WFO against Mr. Katunin to enforce an unsatisfied Russian Judgment (“the 2014 Action”). On 26 May 2016 VTB was granted ex parte leave to serve the claim form out of the jurisdiction and to do so by way of alternative service under CPR 7. 8A (1) (“the Alternative Service Order”). Mr. Katunin applied to set aside the Alternative Service Order which was first refused by Bannister J [Ag.] but was eventually granted by the Court of Appeal on 20 June 2016. On 4 July 2016 Mr. Katunin applied for an order to discharge the WFO as the claim form had lapsed due to VTB’s failure to apply for an extension of time for service out of the jurisdiction within 12 months. Mr. Katunin also sought the discharge of the WFO on the grounds that there was no real or continuing risk of dissipation and/or misrepresentation and non-disclosure (the “Discharge Application”). On 14 July 2016 VTB applied for an extension for service of the claim form pursuant to CPR 26.1 (2) (k) and 26.1(6) and applied for an order that service of claim form be dispensed with entirely (“Claim Form Relief Application”) pursuant to CPR 7.8B.

Wallbank J [Ag.] dismissed VTB’s Claim Form Relief Application on the basis that the Court had no power under CPR 8.13 (3)(a) or CPR 26.1 (2)(k) to extend time for service of the claim form in these circumstances and that the power under CPR 26.1(6) would only assist if there were ‘special circumstances’. The Learned Judge then deemed that special circumstances would only exist where there are ‘truly exceptional circumstances’ and where a refusal of an extension would ‘wreak an injustice’. The Learned Judge held that there was no such special circumstances and consequently granted the Discharge Application. VTB then filed a new action (the “2016 Action”) to enforce the initial Russian Judgment without prejudice to the 2014 Action and was granted a new WFO against Mr. Katunin which took effect at the same time that the WFO in the 2014 Action was discharged.

The Court of Appeal allowed VTB’s appeal against the decision of the Learned Judge setting aside the decision in the Claim Form Relief Application and reinstating the WFO. The main issue decided by the Appellate Court was whether the Judge at first instance placed an unnecessary gloss on the test of “special circumstances” which elevated the established threshold under CPR 26.1 (6) which reads “In special circumstances on the application of a party the court may dispense with compliance with any of these rules.” The Court of Appeal held that the use of the words ‘surely truly be exceptional, and then only if to do so would otherwise would wreak an injustice’ was unacceptable in an interpretation of the power under CPR 26.1 (6) (Abela and others -v- Baadarani [2013] UKSC 44). The phrase ‘special circumstances’ was intentionally left unqualified and the Learned Judge had wrongly imposed a higher evidential hurdle on the appellant. When considering CPR 26.1 (6) the only question the Court should ask itself is whether in all the factual circumstances of the case, special circumstances are made out.

The Court of Appeal held that due to the improper threshold placed by the Learned Judge, he also incorrectly evaluated the evidence before him and that VTB has made out special circumstances. The Court of Appeal allowed for an extension for service of the claim form in the 2014 Action. Facts such as the costs implication and ensuring that the case was dealt with expeditious were also taken into account in furthering the overriding objective.

Aside, the Court of Appeal upheld the finding by Wallbank J [Ag.] that the Court should not use its general discretionary power under CPR 26.1 (2) (k) to extend time to apply for an extension under CPR 8.13. To do so would defeat the policy behind CPR 8.13 if the conditions imposed under this rule could be circumvented by using the Court’s discretionary powers under CPR 26.1(2) (k) (Kenneth Williams -v- Leslie Chang et al NEVHCV2010/0153 delivered 10 October 2012, unreported).

These proceedings had a concurrent appeal in Civil Appeal No. BVIHCMAP2017/0006 which focused on costs and is not dealt with in this case study.

 

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JSC VTB Bank -v- Alexander Katunin -v- Sergey Taruta

 

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